Snap Inc. (SNAP) Earnings Call Transcript & Summary

Welcome, everyone, to the very first Snap Inc. Investor Day. I'm Betsy Frank, Senior Director of Investor Relations. And on behalf of the entire team here at Snap, thank you all so much for joining us today. Over the next few hours, you will hear from 9 senior leaders here at Snap, starting with our co-founders, Evan Spiegel and Bobby Murphy, we structure the day in 2 parts. We have 5 presentations, a 15-minute break, 4 more presentations and an analyst Q&A session at the end. Evan will give you more color at the conclusion of his presentation on what each of the speakers will share with you today. We truly appreciate you all being here today to learn more about Snap. I personally look forward to following up with many of you afterwards. The presentations will be posted to our website at the conclusion of today's event, and the transcripts will follow shortly thereafter. Before we start, I must let you know that we will be making forward-looking statements in today's presentation. So please do take the time to read disclaimer on the screen. Any statement that refers to expectations, projections, guidance or other characterizations of future events, including financial projections or future market conditions is a forward-looking statement based on our assumptions today. Our actual results may differ materially from these forward-looking statements, and we make no obligation to update these statements. For more information about factors that may cause actual results to differ from forward-looking statements, please refer to our filings with the SEC. Thank you. And let's begin, it is my pleasure to introduce Evan Spiegel.

Welcome, and thanks, everyone, for joining us. It's amazing to be at our first-ever Investor Day, 9 years after our founding, and what a 9 years it's been. Sitting in my dad's dining room table all those years ago, Bobby and I could never have imagined creating a business that reaches so many people. Each day, we serve 265 million daily active users, and we've had a ton of fun transforming the way people live and communicate around the world through our service. One of the most exciting things about technology is that it fundamentally changes the way we express ourselves. As a child, I remember playing with KidPics on our family's first Macintosh and being captivated by how quickly I could create artwork. And then with the click of a button, start a new. The transformative potential of technology to enrich our lives and support our community has inspired our mission at Snap to contribute to human progress by empowering people to express themselves, live in the moment, learn about the world and have fun together. With the Macintosh and KidPics and eventually Photoshop due to empower my creativity as a child, laid the foundation for what the Snapchat Camera is now doing for people around the world, and it's extraordinary how fast it's happening. The camera was once a tool for documenting important moments, but it has now become a powerful platform for self-expression and visual communication. There are 5 billion snaps created each and every day and because the Snapchat generation is 150% more likely to communicate with pictures rather than words, the camera will become even more central to the way we interact and build relationships with our friends and family. That is why, over time, the camera has provided opportunities to grow and expand our business. We started with stories, which helped our community express themselves by sharing pictures and videos from their day with all their Snapchat friends in chronological order and without likes or comments. We rejected norms that defined social media at the time and invented new ones that are consistent with our values. This taught us the importance of having a vision and sticking with it. But stories also showed us that other companies could take our most popular innovations and quickly copy them. This was a meaningful lesson. It fundamentally reshaped how we think about our business and inspired our long-term strategy, which is focused on evolving our new product innovations into scaled platforms that we believe are more defensible. Now 9 years into our journey, we've developed a number of unique platforms. They bring value to our community, and they're also more difficult to replicate. It's one thing to design an augmented reality lens that pushes the bounds of creativity and enhances self-expression, but we work to serve a community of independent creators around the world and give them the tools to innovate. And when we do that, we unleash the power of our platform with over 1.5 million lenses created with lens studio and more than 200 million people engaging with AR every single day. Our strategy is to take product innovations like augmented reality lenses and evolve them into platforms by building tools for creators and developers and providing distribution for their creations to reach the Snapchat community. We've laid a foundation for this to happen more broadly by organizing our platforms into 5 main screens of our application, Camera, Map, Chat, Stories and Spotlight. These are represented in the action bar on Snapchat, and I'd like to briefly introduce them. Snapchat opens to the camera, which we believe represents our greatest opportunity to improve the way people live and communicate. Our cameras used to create snaps, to send to friends or add to stories, post on our map and submit to Spotlight. So our camera is already capable of extraordinary things, but it is augmented reality that is driving our future, a future that Bobby will bring to life in more detail in just a few minutes. In the past few years, our substantial investments against our vision for augmented reality have put us in a position to lead the industry, and we're doubling down on this strategy in 2021. Augmented reality has evolved from something fun and entertaining into a real utility. Our camera can solve math equation, scan wine labels to find ratings, reviews and prices, tell you the name of the song you're listening to and so much more. Last quarter, we signed a partnership to enable more than 200 beauty brands to upload thousands of SKUs to our camera, enabling our community to safely try on and shop for make up during the global pandemic. And we've barely scratched the surface of what's possible. Stories is another important platform for Snap. Despite its substantial competitive pressure, stories has become our largest driver of revenue. It's a place where people share snaps with their friends in narrative form and watch content from professional publishers and influencers. We generate the vast majority of our revenue from Snap Ads inserted in between those stories, and these ads allow our community to take direct action by swiping or tapping, and they become an important tool for direct response and brand advertisers. We also see incredible potential for our communications platform, which lives within the chat screen and is easily accessible within the action bar. This isn't simply where our community expresses themselves through Snaps and chats. It's also where we've introduced 2 new offerings, Minis and Games. Minis are a new platform for social experiences. Snapchatters are already meditating together with headspace and buying movie tickets with a Mini made by Adam. And games like Ready Chef Go! by Mojiworks and Aquapark by Voodoo are enabling friends to play together in real time, creating more opportunities for meaningful interaction. Minis and Games integrate partners who help our community play, learn and have fun together, all within chat, deepening our community's relationships through shared experience. We've also elevated the Map to make it 1 of our core screens and it represents a huge opportunity for our business. More than 250 million Snapchatters engage with our Map each month to find their friends and see what's happening around the world, but this is only the beginning. We've started integrating businesses and schools into our map, helping our community connect with places and discover new ones. There are more than 35 million businesses on the Map and a growing number of small businesses see our map as a new way to build relationships with our audience. The Snapchat Generation makes up 40% of global consumers and already yields $1 trillion in purchasing power, and they are an important part of the fabric of our local communities. Our community is driving the future of our society, our culture and our economy. Late last year, we also launched Spotlight, the newest platform on Snapchat. Spotlight empowers members of our community to inspire each other with their creativity and services the most entertaining Snaps, while making sure they are consistent with our values. We've been overwhelmed by the positive response from our community. Just a few months since launch, we're seeing 175,000 submissions per day with more than 100 million monthly active users. The creative tools in our application unlock new forms of self-expression and creativity while also strengthening Spotlight as a growing platform. The success of our platforms speak to the sustained value we bring to our community. And they also highlight the enormous growth opportunities for our business. In 2020, we generated $2.5 billion in revenue during a challenging year and we also met our goal of full year adjusted EBITDA profitability. What's most exciting is that we're positioned to continue our growth well into the future. Our meaningful operating leverage means we can reinvest ambitiously in our products and make big bets on the future of augmented reality. We believe that AR represents the next major shift in computing, and we're committed to leading the way. Despite the power of mobile phones, we're still constrained by the 4 sides of a small screen. So our team is building towards a future that transforms computing by overlaying computing on the world through wearable technology and empowering new ways of interacting with technology, including gestures, speech and gaze. We're entering a new era of self-expression and learning that will allow our business to make our most meaningful contribution yet to human progress. We believe it is crucial for Snap to succeed as a business, not just for the sake of our company, our community and our investors, but because Snap will play an important role in defining the purposes and practices of the next-generation of technology platforms. As computing becomes even more personal and even more deeply integrated into every aspect of our lives, we believe it is essential that technology and its accompanying business models reflect and enhance our shared humanity and society's most important values. What is at stake here is trust, the key ingredient that ties humans and technology together to realize the benefits of technology's greatest potential. Snap is building a business that will contribute to a more positive vision of the future by empowering and protecting our community and giving them new ways to have fun, express themselves and to enrich their lives. We have a fantastic team that is deeply committed to making this vision possible. And I'm so excited for you to meet a few of the folks who are driving our progress here at Snap. Bobby, our Co-Founder, Chief Technology Officer and dear friend, will talk about our camera, augmented reality and the future of computing. He'll be followed by Jacob, our Vice President of Product, who will talk to you about the products we built and how we turn those into platforms. Peter, our Senior Director of Product, will share how we turn those platforms into businesses that are core to driving our success. And Jeremi, our Chief Business Officer, will share more about our long-term strategy for revenue growth, followed by Kenny, our Chief Marketing Officer, who will share insights into the marketing philosophy powering those efforts. You'll also get to the newest member of our executive leadership team, Ben, our SVP of Content and Partnerships, who will speak about our partner ecosystem; and he'll be followed by our SVP of Engineering, Jerry, who will highlight our cloud-based infrastructure strategy. And last but not least, our CFO, Derek, will talk about our ambitions for long-term value creation. And then I'll be back with you at the end of the day to answer any questions. Lastly, I'd just like to say thank you so much to all of our investors. We're so grateful for your tremendous support of our community and our long-term vision for the future. And we are so thankful to partner with all of you. Have a great day, and I'll see you a little bit later.

Thanks, Evan. It's great to be with you all today. I'm Bobby, and I'm the Co-Founder and Chief Technology Officer at Snap. I'd like to expand on our vision for the camera and for augmented reality. Let's start with the camera. As powerful and portable as modern computing is, we are constrained in how we engage with it. Hunched over with our fingers tapping and swiping on small screens. Advances in technology will change this, overlaying digital experiences directly in our field of view and empowering us to engage with computing the same way we do as humans, with our heads up looking out at the world in front of us. Over time, the gap will close between what we are able to see through a screen and what we're able to imagine ourselves and with others. Our ability as humans to transmit ideas will improve dramatically with information and entertainment directly in our line of sight. Our goal as a company is to accelerate the path to this future by building on what is possible today. This requires that we reimagine the role of the camera. Historically, cameras were used for documenting moments, capturing a scene exactly as it is for the purpose of viewing it later in time. Now through developments in hardware and software, we can do a lot more than just capture a scene. We can understand, interpret, edit and augment a scene, and not just for later, we're increasingly able to do all of this in real time. This is the camera that will enable the next-generation of computing. And that's why we are a camera company. So how do we get to this future? Well, it starts with the Snapchat camera. It is the first thing you see when you open Snapchat, and it is used by 265 million people every day to create an average of 5 billion Snaps. This engagement, which is rooted in visual communication is the perfect foundation from which we can explore new experiences in the camera. This began with post-capture features like captions on images and geo-filters. But quickly led to bringing augments on reality into the live camera. We call these lenses. And now more than 200 million people engage with lenses on Snapchat each day. Let's take a look at how our community is using it. [Presentation]

As you can see, the camera is transforming how we experience the world around us. Our augmented reality platform is driven by 3 major efforts: one, innovating in technology to unlock new capabilities in the camera; two, exploring creatively to design exciting and informative experiences; and three, supporting a growing community of AR consumers and creators. We're investing heavily in each of these with incredibly talented technical and creative teams in which scientists, engineers, designers and product and community thinkers are working together to invent the future. When combined with the frequency of engagement we see from Snapchatters with our camera, we have a unique ability to very rapidly develop, design and deploy AR experiences at tremendous scale. We are able to learn what resonates in AR and what I believe is an unprecedented rate. Many of the lenses we might consider silly or playful, like vomiting rainbow, a dancing hotdog or a whale flying to the sky are really a chance for us to deploy cutting-edge tracking or segmentation technology to hundreds of millions of people from which we can immediately learn how to refine our strategy to advance the field of AR. So let's walk through some of the ways we are developing augmented reality together with our community. Some of our most recognizable lenses have been what we call face lenses. These are lenses based on facial tracking technology that understands the contour of the face and movements like opening the mouth or raising eyebrows. Over the years, we've improved the accuracy and robustness of facial tracking to allow AR to stick on the face from wider angles and through faster facial movement. More recently, we've deployed state-of-the-art neural rendering, using generative machine learning to completely transform faces. This is the technology behind our popular gender and age transformation lenses, our animated lens, our cartoon lens and others. These have become incredible viral hits, driving significant engagement around the world. Landmarkers, which we released a couple of years ago, used public snaps and other images and videos captured in a location to reconstruct physical spaces in 3D, allowing snapchatters to instantly see augmented reality experiences that are attached to the world with Pinpoint Precision, like this Dragon from Game of Thrones, landing on the Flatiron building in New York. We took this further with local lenses, expanding the scale of landmarkers and combining them with the same infrastructure that powers Snap Games to enable real-time shared AR. We showcased this in City Painter, a lens in which Snapchatters and their friends can virtually paint the buildings on London's Carnaby Street. With scan, Snapchatters can search lenses based on what is recognized in the camera's field of view. This work started years ago with Snapcodes, a convenient way to use our camera to add a friend or find content and is quickly growing into the ability to search any visual input to find the best, most relevant AR experiences through integrations with Photomath, PlantSnap and Vivino and the Snapchat camera can solve math equations, identify plants and lookup wine reviews. Each of these efforts represent the early beginnings of much deeper, more powerful technology. Neural rendering will lead to even more realistic visual transformation, enabling real time, high-quality special effects. Landmarkers and local lenses are the precursor to large-scale robust 3D mapping, which will someday allow anyone, anywhere to engage with AR connected to any physical space. And scan is the starting point to bring our vast growing library of AR experiences, not to your fingertips but immediately into your line of sight. We're not alone in our excitement for the future of AR, and it has been especially motivating to see others from individual hobbyists to many of the biggest brands playing increasingly central role in developing this future. Three years ago, we began our journey to expand AR on Snapchat into a platform. This started with the public release of Lens studio. Lens studio is the same tool that our own internal teams use to create and distribute lenses to the entire Snapchat community and with it, anyone in the world can do the same. It is remarkably easy to use with simple templates to get started yet incredibly powerful, enabling the development of rich complex AR experiences. From this simple tool, AR can be deployed seamlessly to hundreds of millions of people around the world across thousands of unique device types on Android and IOS. The response to lens has been truly inspiring. There are now over 150,000 creators who have made over 1.5 million lenses. Best of all, we continue to be amazed by the creative ideas generated by our community, which is a clear indication that long-term success in AR requires a vibrant ecosystem. I mentioned earlier that progress in AR depends also on technical advances, advances that enable cameras to understand and change visual input like recognize a product, identify the edges of a building or transform surfaces. These technical advances are driven by machine learning and as invested as we are in building the highest impact capabilities for AR, this is a huge field across the industry. Individual scientists and engineers, research labs, small and large companies are all every day inventing new ways for computers to interact with the world. So this past year, we released Snap ML. This is a first of its kind feature for Lens studio, empowering creators to bring new ML capabilities into their lenses. We're tapping into the innovative horsepower of the entire field and already, we've seen significant growth in the capabilities of our AR platform. Through Snap ML, we integrated partner capabilities like foot tracking, powering compelling virtual tran experiences like this Gucci shoe lens. And we've seen sophisticated new experiences from creators. James Hurlbut trained an ML model to detect surfboards, developing a lens to rate on key qualities like shredability. And at [indiscernible] trained the model to identify and translate 1,000 different objects to Hindi. He's built several translation lenses now to help Snapchatters learn new languages. Last year, we announced Camera Kit. And with it, we're expanding the footprint of our platform even further to allow lens studio to power AR in applications outside of Snapchat. We're working with a handful of partners now with general availability coming soon. We are extremely optimistic about all the growing momentum in AR for smartphones. It's a starting point to imagine AR beyond the phone. To fully realize this idea of computing overlay directly on to the world will require a new device. A completely new kind of camera that is capable of rendering digital content rights in front of us, put the power to instantly and continuously understand the world as our own eyes do, and all in a light wearable form factor. Spectacles is our investment in this future. It's an opportunity to design and develop a device specifically for augmented reality. We're doing this incrementally by building and releasing increasingly more capable devices that are connected to the Snap platform. Over time, the same lenses that we're starting to see on today smartphones, lens that can help you shop new outfits, see your favorite characters come to life or learn new things about the world, will be able to be experienced in full immersive 3D. I hope this is a helpful glimpse into a few of the many things we are doing as a company to push towards this future of the camera. And I hope this gives you a sense of how all our investments fit together. Visual communication and the frequency of engagement with the Snapchat camera allow us to rapidly explore new experiences in the camera. We have sustained fast organic adoption of augmented reality through lenses, and we are innovating technically and creatively, leveraging the insights from this scale of adoption. From this, we are supporting a growing ecosystem with new and existing businesses finding more and more value in AR. And through all of this, our pace of execution and our pace of learning continue to accelerate. Augmented reality represents a shift in our ability as humans to transmit ideas. It allows us to render digital experiences directly into physical space and to use the camera as an input to access information and content far faster than keyboards can ever allow. We've already seen remarkable momentum across the Snap ecosystem. In the coming years, we will further develop our platform, growing in our capacity to provide tools, services and distribution to accelerate broad adoption of AR on and off Snapchat. Most importantly, our team is incredible. It is made up of some of the most brilliant and imaginative minds in the world. More passionate about augmented reality and together with our community, inspire us to keep inventing. Now I want to turn it over to Jacob to speak about the other services we offer in Snapchat and how they connect to the camera. It was great to speak with you all. Thank you.

It's great to be here with all of you today. My name is Jacob, and I believe the best stories are chronological. So I'd like to take this opportunity to start with the origins of Snap's product philosophy. Over the last 6 years, we've taken our product DNA and evolved an approach that has fueled innovation and unlocked growth. From day 1, the product culture at Snap has been one of empathy. Understanding our community, building for their needs and doing the right thing where practices that allowed us to identify opportunities and invent entirely new solutions. Empathy in this initial stage led to a series of critical innovations. When Evan and Bobby first set them to create a faster way to communicate, they realized that people had been drawing to text-must stream for its asynchronicity or the ability to chat back and forth at your own pics. But along the way, texting sacrificed the richness and expressiveness, only found in face-to-face communication. Testing was simple, fast and functional, great characteristics of a transactionally focused communication platform. But partly the right medium for close friends to create an emotional connection digitally. Voice calling provided a bit more emotion, but required synchronicity and lacked the context of a visual element. Evan and Bobby quickly realized the power of the camera and visual communication. Snapping or talking with pictures was born out of these realizations, with its origins in Evan and Bobby's empathy and observations of the world around. The key to this realization was that -- was incorporating the camera as a communication medium rather than a tool to archive and preserve memories. The combination of a communication focused camera with the femoral snaps led our community use the camera as a natural extension of their conversations. Today, we are using this foundation to build the world's leading platform for communication with real friends. Communicating between real friends is not only something that Snapchat is uniquely positioned to serve, but is also the most frequent and meaningful type of communication. Our communication platform is a core driver of retention for our service and the engine that brings people back multiple times each day. In the last year, we've made foundational improvements to performance, to make communication even faster by rewriting and regionalizing critical parts of power back-end infrastructure. Years ago, while listening to our community, we were inundated with requests for a send-to-all button, but we need this idea additions, be able to send a snap to everyone at once would devalue receiving one and risk the service becoming spam-written if people were sending snaps to all of their friends all of the time. But Snapchatters wanted an easy way to communicate with all their friends at once. As we studied the landscape, we were confused by the reverse chronology and permanence of the existing forms of one-to-many share. This hurdle of an exploration grew into stories. The revolutionary format used by billions of people around the world across major digital platforms. Today, Snapchatters post stories to share their lives with trusted services and watch stories to catch up with the day-to-day lives of their friends. Friend stories are the second key pillar of engagement and retention, a strong foundation for our monetization of Snapchat with our advertising partners. Since launch, we've augmented friend stories with Discover, which offers curated professional content designed for our mobile-first audience. Within Discover, we hand select partners to deliver news and entertainment to our community across publisher stories and ships. Our editorial selectivity and curated approach has helped us bring brand-safe, best-in-class mobile content to our community that is accurate, timely and topical. Then we'll spend a little more time on Discover later in the day. When we invented stories, our community at that time was small and young, much like our company. Stories and Snaps were changing the world and driving global growth. Our growing global community meant that we needed to expand our thinking and create new tools to build empathy with a diverse worldwide audience. From this need, we created our growth approach. We did not replace human center design with a relentless data-driven culture like we've seen in our peer companies. Instead, we established a data-formed approach that allows us to retain our DNA of innovation with the valuable augmentation of data. This data-informed method drives both growth and innovation. The way we build products and grow products today is centered around delivering value to our community. This is in contrast to many other companies, who primarily focus on driving behavior. Behavior is easily measured with metrics. And it is often assumed, the user spending more time or opening an app more often is universally good or even beneficial for our company. This mindset makes 2 very important things difficult, virtuosity and innovation. There are many non-virtuous ways to drive app opens and time spent that do not result in customer value. Therefore, undermining long-term engagement and retention. Not all engagement is good engagement. To avoid this trap, our product processes are built specifically to deliver value to our community through all the products we offer and not to drive short-term behavior. Over the last 5 years, our community has told us that they use Snapchat because it's the fastest way to communicate with the people they care most of them. Whether they are snapping or posting stories, our community loves how our camera, creative tools and augmented reality make communicating information and emotion even faster and easier. This core product value has been our primary focus in driving growth across all teams of sale. Our core product value orientation has driven improvements in areas like performance, new user-friendly and self-expression, all of which drive meaningful and compounding improvements to top line growth. The progress that we've made in these areas serve as strong validation, the focusing on product value and not behavior delivers impactful improvements that meaningfully drive measurable growth. Our approach oriented around product value also protects and deepens Snaps' DNA of innovation. When the empathy gap grows as new products and companies scale, many choose to abandon the early-stage approach of design-driven product innovation in favor of a highly iterative, data-driven approach that leaves little room for both risk and innovation. At Snap, we were fused to abandon our core of human-center design and culture of innovation. Instead, we've built tools and mechanisms to minimize risk as we scale, improving our innovation success rate through our data-informed approach. This approach is evidenced with our map, which is used by over 250 million Snapchatters each month to keep up with friends and share with their up to. On other platforms, everyone sees the same map. But on Snapchat, we are building the world's most personal map. Your Snap Map reflects your world. Its features the people, places and activities you care about and know is you are the same. The map is built to see where your friends are and what they're up to quickly and easily. This kind of sharing is at its best with close friends, a perfect fit for the best friend's network that is a unique to Snapchat. The version of the map in our app today is one that has been relentlessly improved in conversation with our community over the last 2 years, leveraging this data-informed approach. To build innovative products like this, we leverage user research and the work of our sociology team. Together, these teams create hypotheses that we then validate and size with the help of our data science teams. These hypotheses go on to form problem statements, and this is where the human-center design process begins. With our design approach, we value our community to help us identify the biggest problems and opportunities, but we critically rely on the design process to create the most innovative solutions. One of these opportunities was realized in Spotlight. Launched 3 months ago, Spotlight shines a light on the most entertaining snaps created by the Snapchat community, which has always told us they loved our camera and creative tools, but had to post to other platforms to find an audience. We set out to build spotlight as it placed directly within Snapchat that allows anyone to reach a massive audience if they make a great snap. We also designed spotlight with our long-held values at its core. It doesn't feature public comments and all profiles are private by default. All content on Spotlight is moderated through automation and human review before it's likely distributed, a critical aspect of going up to the high expectations of both our community and our advertising partners. With Spotlight, we didn't stop at democratizing creativity and distribution, we also democratize the creator economy with our incentive program where anyone can earn. Ben will touch more on this later today. By building a product culture focused on value delivery, we have found a reliable way to drive top line growth and innovation simultaneously. We have proven the success of this approach as we evolved each of our products into the fine scale platforms on Snapchat, map, communication, camera, stories and Spotlight. Each of these platforms were built with 3 distinct values. First, having a deep respect for our community's safety and privacy; second, creating experiences that contribute to their well-being and happiness; and third, enabling them to experience the world with their friends in new and exciting ways that make a positive impact. Our content products will continue to deliver increasing user and advertiser value. And in the future, we continue to invest in the platform evolution of our map and communication products. The map started with threats. And now we've added places. For our community, local businesses are places to meet, hang out and create. They form a key part of our relationships with each other and the world around us. For local businesses, this home on Snapchat will give them new ways to reach our community. We have already added 35 million businesses and we're creating opportunities through integrations with food delivery partners like Uber Eats, DoorDash and Grubhub and reservations with OpenTable. Soon, you will be able to find your favorite places and discover new ones on the Snap Map. The product becomes even more personal as our community continues to interact with the world around them. When thinking about the future of our communication platform, the only thing best friends do more than talk is hang out. Over the last 2 years, we have invested in new ways for friends to spend time together inside of Snapchat, right from the chat tab where they're already communicating. In 2019, we started with Snap Games. And today, over 30 million Snapchatters play games each month. With Snap Games, Snapchatters can play together at the same time even when they are apart. Snapchatters and developers love Snap Games. And this is just the beginning. New game titles, styles and genres are next, engaging an even larger audience and a wider range of developers. Last year, we extended this investment in share experiences beyond games, with Minis. Minis are bite-sized utilities that friends can use together directly inside Snapchat. It load instantly, requiring no registration or personal information and make coordinating between friends faster than ever. With Minis, we're currently working with a small group of partners to get the experience right, similar to our approach we used to grow discover, but early indications have been excited. For the 2020 election, we partnered with the nonpartisan organization Democracy Works. Through their Mini, we were able to help over 1 million U.S. Snapchatters registered to vote, view a sample ballot and Snap their friends about registering. Since elections occur infrequently, registering to vote is a great example of an experience that makes more sense as a Mini compared to a space-consuming ever-present mobile app. As we look into the future, our map and communication products will continue to bring people together on and off platform, helping them feel even closer to the world around them and the people they care most about. Our values-based approach to design and our relentless focus on delivering core product value has been the engine that has powered our growth to more than 265 million daily active users. In conjunction with network effects, this approach provides compounding value that we believe will continue to accelerate the growth that we have experienced in the past few years. Creating the easiest and fastest way to communicate, transcends borders and agents, while the number of friends, substance of conversations for amount of time our community dedicates to friendships may differ by region, age and lifestyle, the need to develop and maintain close friendships is universal. As we have extended our empathetic approach to grow into new regions and demographics, we have found that our core product value resonates globally. While there will always be work required to ensure Snapchat feels made for each of our customers. We have not felt the need to reinvent ourselves fundamentally with every new challenge, accelerating growth into new regions requires us to ensure that the key elements of each platform feel native to new communities rather than creating an entirely new product. This allows us to work relentlessly on establishing the precondition, like connectivity and performance, setting the stage to quickly adapt and grow into new markets. A great example of our work is in India. We have seen accelerating growth in the region with our community doubling in size in the past year. Much of this growth came from demonstrating our core product value to the Indian community while taking efforts to ensure the Snapchat feels made for our community there. We took obvious steps like hiring local designers to ensure a creative tools at AR reflect local culture and partner with local content producers and creators, added 9 new languages and much more. But we went even deeper to develop an empathetic and data-informed approach, including in-market research studies, launching programs with high schools to deeply understand communication behaviors of our core demographic, recreating the network environments in our labs to better develop for local connectivity and refocusing our team to improve the annual experience, which is much more prevalent in our less penetrated markets. We worked on performance of the network and app alongside deep localization to make Snapchat feel made for me, no matter where in India you were. When this foundation was laid, we saw growth in India accelerate, a clear demonstration of the fundamentals broadly applicable to many markets beyond India. Importantly, our efforts in India and other markets were focused on enhancing the existing value of our 5 platforms, rather than needing to create new value through new features or products specific to the market. Having a universal set of values at our core and a clear path to making them accessible to new cohorts and markets, ensures that our growth is scalable and repeatable. And while many have tried to recreate the value of Snapchat by copying certain features, we continue to see our value remain differentiated. And communities adopt Snapchat as the best way to live in the moment and share experiences with their closest friends. Since the first quarter of 2019, we have doubled the size of our daily active community outside of North America and Europe, with year-over-year growth rates accelerating as we increase penetration and see our communities engage with our core products value. To close, we believe that the best way to build the business in the long-term is to remain focused on delivering value to our community, partners and advertisers. For Snapchatters, that means improving their lives each time they use our service to connect with their friends or learn about the world. For partners and advertisers, we will continue to build new products and platforms to provide reach and distribution to our unique and unduplicated audience. All of this is done in concert with our values at empathy and through human-centered design. We believe this approach is critical in fostering a durable relationship with our community and our partners. This approach has guided us well thus far and will continue to serve as our compass for years to come. I'm thrilled to introduce you now to Peter Sellis. He'll take this product story a step further and share how returning these platforms into businesses.

Jacob just spent a lot of time giving you an overview of how we build our products. Well, at the end of the day, I think somebody needs to figure out how we can make money out those, and that's why I'm here. My name is Peter, and my team works to evolve our platforms into businesses. Our long-term vision is that each of the 5 platforms will generate revenue proportional to the value that they provide our community. Via the work on our self-serve ad platform, we're in a position to drive multiple years of 50% plus revenue growth. This was not easy. I'm going to outline how we did that, the struggles we faced and how overcoming them has created a resilient business. Let's go back to 2015 and 2016. We focused on bringing mobile-native formats to market, starting with vertical video. We helped advertisers pivot from desktop landscape video to mobile by offering the first full-screen vertical format at scale. This format is now widely considered an industry standard. At the same time, we also launched the world's first camera advertising scale with lenses and filters. As you probably remember, these capture the imagination of our audience and advertisers alike. And this really hark into our unique advantage that Snap wasn't just mobile-first. It was mobile-only. This was the sole major platform for which that was true. And it allowed us to pioneer many of the ad formats that are just now coming to market on other platforms. But there was a problem with this approach. Custom formats, such as vertical video, meant that advertisers have to spend a lot of money and time on creating. This, in turn, meant that the campaigns had to be expensive and broadly targeted to justify that time and money. This made those campaigns inaccessible to almost anyone except the largest global brands. And even for those, they were inefficient due to their broad targeting and slow turnaround. So we work to change that. In 2017, we launched our self-service platform called Ads Manager. Over the next few years, we worked tirelessly to make this tool best-in-class, competitive with the largest digital app platforms out there. We shifted our buy model from expensive e-mailed PDF insertion orders to an efficient, fitted performance-driven marketplace. We rapidly expanded from 2 bidding outcomes, which we call gold-based bidding to over a dozen options. These included options such as App install and pixel purchase. And then we relentlessly responded to customer needs, particularly around targeting optimization and insights. We introduced features such as dayparting, accelerated bidding and audience insights. But again, we encountered a challenge. This rapid shift to self-serve eroded yield. In fact, over the course of 2 years, we went from approximately 90% managed to 90% self-serve. And during this time, we reported consistently decreasing CPMs. These lower prices absolutely benefited our advertisers, but they were disruptive to our revenue growth trajectory in the short term. So next, we invested aggressively in optimization, measurement and ad ranking, in particular. We set out to build the best ad ranking team in the industry focused on driving measurable advertiser outcomes more efficiently. In this way, we could actually increase CPM and increase ROI in parallel. This phenomenon is at the core of what is a somewhat counterintuitive flywheel that I think is actually really important. So I want to focus on it. The fire wheel means that more demand can also mean more efficient outcomes. As you'll see in the diagram, the more advertisers we have, the more diverse the set of ads that we can show. That makes these ads more relevant and it makes Snapchatters more likely to engage with them. This, in turn, drives higher ROI and makes us more efficient with our inventory. So we can end up supporting more demand, the first place. A great example of this is actually something that Derek talked about on our last earnings call. She talked about the idea that effective CPMs for inventory that were monetized via pixel purchases had risen 41% sequentially in Q4. The cost of those pixel purchases, however, had actually decreased 11% over the same time period. That is the power of better ranking, better optimization and growing demand in action. But there was a new challenge. There kind of always is, if you're not getting the theme yet. This unabated pursuit of performance-oriented advertising was implicitly biased towards direct response. The engaging format that captured the imagination of brand advertisers in 2015 and 2016, they didn't fit neatly into a biddable auction-based environment. By the start of 2020, the majority of our revenue is DR and camera advertising growth had actually slowed. However, we knew we could solve problems like this. Today, every great advertiser is a performance advertiser, brand or direct response. It's just a different time horizon. The best advertising appeals as much to the CFO as it does to the CMO, meaning it's an essential investment in the future of a business. Brand advertising is absolutely the cornerstone of this. Therefore, we envisioned a set of self-serve tools designed with brand buyers in mind, where planning, predictability, transparency are all critical. We started this journey with reach and frequency, which allows advertisers to reserve campaigns at a fixed price. We also then brought one of our more successful offering Snap Select to our self-serve environment, but we only opened it to our best partners. It allows for reserve prepackage discover buys of our best content. And then most recently, we launched first commercial, which, again, exclusively for our best partners, but still built into our self-serve tools, allows brands to reserve the first commercial that a snapchatter sees in a given day. So at the end of all of this, where do we end up? Well our ad stack is one of the most full-featured and advanced on the market for both brand and direct response. Our team remains uncompromisingly focused on building a platform that works for advertisers of all types and all sizes. This work has set the foundation for a future with significant opportunity to grow in video. As advertisers utilize our full suite of goal-based bidding options, we can translate investments in machine learning directly into revenue gains. Furthermore, friend stories and Discover are still nascent within many markets and even within some of the cohorts of our developed markets. This leaves us ample potential. New areas, such as Spotlight can be immediately additive due to the flexible, fungible nature of our demand and our modular tool. And then finally, our business is still very early in many valuable advertising markets worldwide. And Jeremi is going to talk a little bit later about exactly this. We also have untapped potential within our service to grow our group. Our team will focus next on the camera via AR advertising. We're going to do this by: first, building the core behavior of AR as a utility; then second, making it easier for brands to create and experiment; and then third, we'll pair it seamlessly with our powerful advertising platform. We are investing in building new experiences for specific verticals where we believe AR can clearly augment the customer journey and provide value to businesses. We're going to start with shopping. We've already partnered with several leading brands to leverage our technology for virtual try on experiences. Through our recent beta program with over 30 brands across verticals from beauty to auto, Snapchatters tried on products over 250 million times. These same Snapchatters were 2.4x more likely to click to purchase an average. Next, we're making it easier for businesses to create, publish and share lenses with millions of Snapchatters. We're going to do this by connecting all of the amazing innovation that Bobby talked about in Lens studio with our advertising platform. For example, when we launched SnapML last year at our partner summit, it allowed developers to add their own machine learning model to end studio. One of these partners brought a shoe trion model, Dior then leveraged this trion model to create a trion experience. This experience lives permanently on their brand profile. So finally, we're going to invest in the optimization algorithms to serve AR to Snapchatters who are most likely to meet a brand's objective. So back to Dior, who can take those shoes from their brand profile and create and optimize ad campaign with them. We're going to connect the same buying experience to AR that we have for video. And the best part about this is that the formats actually are proven to work better together. Now let's move on to the map where, as many of you have noted repeatedly, we have a large untapped opportunity. Local, digital advertising is an established market. It has a playbook. And we're confident that this will be an important part of our business in the future, but we want to do it right. Local businesses are considered the backbone of the economy. We launched our first offering, promote local place alongside the addition of place listings as part of our response to helping SMBs through the pandemic. This was the first time that businesses were on the map. It included a dedicated by-flow that directs Snapchatters to a place listing on the map along with new targeting and measurement options. We're going to spend a lot of time expanding these products to work for the largest multi-location enterprises in 2021, but they were honestly reactive to the pandemic, and we feel that we have yet to truly build on the potential of the map. As Jacob mentioned, our first step will be adding more value to place listings. Local businesses are a really important part of meeting up with your friends in real life. And that was something that Jacob talked about that really resonating with me. Because Snapchatters who use the map have location services enabled, we'll actually be able to accurately measure and drive store visits, closing the loop with our own first-party data. But small businesses are time and resource-constrained. It's often the same person serving the coffee that's buying the ad. Building a product that just works is important. That's why we'll continue to add value the places which Snapchatters already checked into millions of times per day. When we do eventually allow claiming local businesses, we'll have a huge engagement pool to tap into and leverage. Finally, let's talk about our communication platform, which includes 2 of our most recent product offerings, games and Minis. We're actually starting to see some really exciting early traction with games. Game developers are starting to generate revenue on Snap. Today, we offer rewarded commercials, which is our 6-second forced-view ad within game, giving partners a familiar way to monetize engagement. We have been working hard with developers to find financial success on the platform. And we were able to more than double revenue year-over-year for them in Q4. We also recently launched a beta product on Android called Snap Token. It's a digital good, which will give developers more options. Our goal here is to experiment with and encourage direct user monetization, and we may expand this beyond just games. Now building off the same technical architecture of game, Minis are less than a year old, but they present a clear opportunity for businesses to build on platform experiences. These experiences will leverage the friends-first nature of Snapchat and the best features of our partner's product, all within chat. While we tested some initial shared experiences over the past year, such as scheduled planning, meditation, events, we are gradually expanding our partners to include use cases such as commerce. If we are successful here, Minis will generate significant value for our partners, and we'll be able to optimize the full funnel from discovery to action, unlocking, again, on platform conversions. Over the coming years, you'll see us continue to add to the organic value that businesses can drive from our audience and our tools. And we will try and tie all of it back to their brand profile. Taking a step back, we believe that we are doing our best work when monetization products act as a complement to our service bringing businesses to our community in an additive fashion. Our team has built a strong base with our Seltzer platform, expanding it into premium video and now the most advanced AR advertising stack. Still, we actually have significant headroom within video alone, which allows us to carefully and thoughtfully expand our business to each of the 5 screens in a symbiotic way, augmenting advertising with other solutions as necessary. Given our growing audience and strong engagement, we expect to meet this challenge as we have in the past, head-on. Now here's my good friend, Jeremi, to talk more about how our team and go-to-market strategy are setup to increase revenue over the long term. Thanks for listening.

Thanks, Peter. Hello. You've met some new folks at Snap today, but I'm guessing my voice might be familiar. I've spoken to many of you on our earnings calls over the last 2 years, but each time, it feels like we're only scratching the surface. The questions go by so quickly, even when you ask 2 instead of just the one you're supposed to ask. But today feels really exciting because you get to hear the whole story from a variety of angles. If we've not yet met, I'm Jeremi Gorman, Chief Business Officer here at Snap, and I'm responsible for revenue and customer operations. But very simply, we have a long runway ahead of us. Our audience is growing, and it's hard to reach on other large platforms. We have pioneered the most innovative ad products. Our vertical video and augmented reality formats are poised for robust growth in advertiser demand. Today, we comprise less than 2% of the U.S. digital ad market. That number is that odd with the fact that we reached nearly half of U.S. smartphone users, which not only highlights the opportunity but forces us to think how high is that. We have made deliberate strategic decisions to put ourselves at the center of industry momentum and trends, and in many cases, we pioneered them ourselves. The U.S. digital ad market is incredibly large at $142 billion today, and it's growing. eMarketer estimates that it will grow at an average of 14% a year through 2024. Part of this growth is coming from the USD 60 billion linear TV market. These trends are very favorable for domestic digital video ads, which are just one component, but an important component of our strategy. We are creating and defining a new market in augmented reality and we're laying the groundwork to bring small and medium-sized businesses on Snapchat. We are also expanding into the $340 billion global digital ad market. And in addition, self-serve advertising, the core of our offering since 2018 will make up nearly 90% of all digital display ad spend by 2022, accounting for essentially all the growth in the space. Mobile advertising is expected to grow faster than desktop advertising. Video advertising is expected to grow faster than nonvideo advertising, and AR and premium mobile content are 2 of the most talked about focused areas for marketers. So again, we are in the center of all of this growth and innovation. Given our growing community, their engagement and success in major advertising markets, we believe that we can continue to grow revenue at high rates for years to come. There is no person at Snap with whom I work more closely than Peter Sellis, who you just met. Sales leadership and revenue product are joined at the head, listening to the market and developing products to solve advertiser problems. Our partners see advertising as a business investment. Every dollar spent is becoming more performance-oriented, leading to the increased use of self-serve tools and advanced measurement capabilities. Roughly 2 years ago, we transitioned from a regionalized to a verticalized sales structure. We believe that as we scaled, we could service more advertisers with relevant categorical experts from our team. Prior to this reorganization, a seller in the Midwest could serve McDonalds', Friends, Target and Coca-Cola. I actually think that was a real client list. They weren't even on the same team as the seller on the West Coast who had T-Mobile, Taco Bell, Gap and Red Bull. That was suboptimal for our clients because we were providing them with the export level service they deserve. It wasn't great for our teams because their attention was divided. And it wasn't great for Snap because there wasn't a mechanism to get best practices by industry type easily from 1 team to another. Now, all telco account executives are on the same team, all restaurant account executives are on the same team and so on and so forth. We aim to be expert business partners to our advertisers, solving problems with them and deeply understanding their businesses. We have 3 major types of advertisers that we service, large brands, which we call enterprise, direct response or performance advertisers, which is our emerging team and small and medium-sized businesses, which are scaled services team. Overlaying this structure is our agency development team. So let's dive into each of these advertiser segments. We have large brands, the enterprise team. This is the first set of customers we partner with. They're large brand advertisers with complex buying structures. This is where our teams are categorized by advertiser vertical. We have long-standing relationships with most of the comScore 1,000, including Verizon, Walmart, Ralph Lauren, P&G, Taco Bell, Coca-Cola and PlayStation, to name a few. To connect these advertisers with our audience in a measurable way, we've developed an increasingly sophisticated suite of ad products and measurement tools that allow them to drive and reach ROI. When you consider what happens in a person's life between the ages of 13 and 34, the Snapchat Generation, you understand why large brand advertisers find deep long-term value in our audience. In this age range, they move out of the house for the first time. They get their first apartment, they get their first credit cards, they get their first car, they take their first trip on their own, and they start to buy the day-day products that they will be loyal to for the rest of their lives. In addition, they have tremendous influence over household purchases. A recent study found that over 80% of parents of Gen Z report that this generation influences household spend. Let's talk about that in practical terms. What does influence over household spend mean? All right. I know we're all virtual here, but raise your hand if you have a gaming console at your house, Xbox, PlayStation. I feel pretty confident that I could look at you in the eye and say you might have made the purchase, but it was probably your teenager or college-aged person who chose between Xbox and PlayStation. And that's what we mean by household influence. Now multiply that by 80% of parents saying that their kids help them make those decisions. And you can see why large brand advertisers would want to get in with the Snapchat Generation now. Building brand awareness with them and favorability now is critical. Larger brands utilize both video ad units and sponsored augmented reality lenses. They invest in our video advertising through commercials and Snap Select, which enables them to buy 6-second nonskippable video ads in a prepackaged fixed price premium inventory environment within our hand-curated discover section. We also offer bidding capabilities that allow larger brands to optimize their campaign for specific goals, swipes, video views, long-form views, first commercial and more. Our unique and innovative AR lenses give our team a huge opportunity to attract larger brand advertisers. In the past, these brands used augmented reality for brand moments to drive awareness and reach through an expensive 1 day takeover lenses. But today, brands are utilizing augmented reality to drive real measured business results. Over the next few years, we believe our AR capabilities will become the next industry standard for mobile native advertising. We have already partnered with several leading brands to leverage our AR and ML technologies to power virtual storefronts and try on experiences such as Champs, Clearly, Dior, Essie, Kohl's, Levi's, Jordan Brand, Sally Hansen and Gucci, just to name a few. The challenge with AR, which is different from our existing video ads business is that we're still in the early stages of development of the AR industry in its entirety. They are not often existing augmented reality budgets that these large agencies are within the brand. However, I've been in this industry a long time. And I remember when there weren't distinct mobile budgets, video budgets, social budgets or e-commerce budgets either, but here we are in a place where those are core disciplines that each brand and each agency, so too will be augmented reality. But it requires a platform in a leadership position to push that opportunity and Snapchat is that platform for augmented reality. As such, we are investing to build the industry and we've done it before with vertical video, with the stories format and now, you're going to see us do it with augmented reality advertising. As Peter briefly mentioned earlier, we recently launched brand profiles, which offer a permanent home for large brands on Snapchat, built around their unique investments in the app, starting with AR lenses, native commerce stores and content highlights. Brand profiles bring these various brand experiences for Snapchatters together into a single home on our service. Ultimately, our customers are the judge of our offering. Here's what one of our large brand advertisers, Universal Pictures, had to say about working with Snapchat. The next set of advertisers, we partner with our direct response advertisers or our emerging customers. They largely comprise app install and direct-to-consumer brands and the sellers on this team are experts on driving to performance objectives at scale. This category has found success on our platform as we've evolved our ad text back and is largely responsible for our always on budget. Direct response makes up more than half of our total revenue now. Advertisers and then this set includes FanDuel, HiSmile, eBay, Go, Sterling Bank and more. The expectation here is that they put $1 in, and they expect more than $1 out in the form of an out download, an e-commerce purchase or a subscribing customer. These advertisers love the scale of our audience, the depth of their engagement and most importantly, the sophistication of our self-serve ad platform. Our investments in our self-serve ads manager were a catalyst for success here. And at the highest level, we are now at feature parity with all of our major platforms. All of the lower funnel bidding capabilities that we now offer like optimizing for a pixel purchase or a subscription, make it incredibly easy for an advertiser to create and launch a high-impact campaign. Our ad formats allow them to tell rich stories and formats that Snapchatters love. And it's easy for them to direct Snapchatters to an actual purchase. Dynamic ads were one of our fastest-growing product categories, with a significant increase in advertiser adoption year-over-year in Q4, serving a broad range of verticals and scenarios. As Peter mentioned, we are also turning augmented reality into an accessible, easy to buy and easy to create ROI-based products. Advertisers can now optimize AR campaigns for clicks, shares, purchases and more. We believe that the most fundamental reliable investment we can make to onboard new advertisers is in machine learning. We're going to drive ranking, measurement and optimization to advance our ads. Here's a proof point from a direct response advertiser, HiSmile about the success that they've had on Snapchat. The third set of customers with whom we partner are small and medium businesses and local advertisers. We believe there are millions more advertisers in this category for whom Snap can help achieve their business goals. Our map will play a key role in onboarding local businesses. And again, as Peter mentioned earlier, we have a tremendous opportunity to help brick-and-mortar small businesses accelerate out of the lockdowns of COVID and engage with the group, many expect to emerge most enthusiastically from lockdown, the Snapchat Generation? We'll go back to those teenagers and college students that you have. How many of them are waiting to run out the door. They'll be the first one to the movies. They'll be the first one on cruise ships. They'll be the first ones on planes. They'll be the first ones at restaurants. They can't wait to get back together with their friends. And when they do, the Snap Map is here for them. To contextualize, the Snap Map is incredibly popular amongst Gen Z and millennials, this generation isn't looking for a way to get from point A to point B, smart, super hard to not get lost in your hometown or your college town, but they do very much care where their friends are. They care where the gatherings are. They care who's at the concert. They care who's at the bar. They care who's at the restaurant. And they care what the hottest new venues in towns are. That's the Snap Map. It's highly personal and highly engaging. We're investing here with a dedicated team to help onboard these advertisers with one to many and 1:1 targeted outreach. In each quarter in 2020, we achieved new record numbers of advertisers, and we see the opportunity to continue that trend long into the future. Now let's take a look at one of the small businesses with whom we work had to say. The last set of customers with whom we partner, are large global agencies, who represent the biggest brands in the world. We have deep relationships with the global holding companies and key independent agencies that create and drive a successful Snapchat campaigns for their clients. In 2020, we relaunched our agency certification training program to bring hands on training across several agency disciplines, including social, creative, video and planning. We also provide insights to help agencies deeply understand the Snapchat Generation during their strategic planning and recently launched a Snap Champions program for creatives within agencies who we've trained as experts on Snapchat AR. Ultimately, this type of outreach and sales structure is critical to foster relationships with large brands, direct-response advertisers, local businesses and large global agencies. And I would be remissed if I didn't provide you with some customer feedback. So here, you see a testimonial from one of the world's largest agencies, Publicis. I also want to touch on how we approach our monetization strategy globally as we grow in new markets. Before we invest in an emerging market, we first focus on building a sufficient based on daily active users. Then for in-country monetization, we start with bringing in nonlocal or export advertisers who may find this new market attractive. An example of that would be an advertiser in the U.K., wanting their products to resonate with our new and growing user base in India. We then augment those efforts with a local certified third-party reseller, one or more in multiple markets. And we truly view them as an extension of the snap of the Snap team. Their offices look Snappy. They wear our shirts, and they represent our brand and market. We manage them very closely. And then as DAU engagement and revenue grow, we transition the sales responsibility more towards in-house direct sales teams. We have a structured approach for evaluating expansion markets on which we focus to ensure we're applying the right level of resources to the right opportunities. We believe we have a huge opportunity to increase monetization internationally as we continue to improve the performance of our application in local markets and apply our strategy to grow our communities, which Derek will touch on a little bit later. Now let's talk about our focused verticals. In order to increase the number of active businesses on Snap, we focus on verticals with a high likelihood of success on our platform. In other words, what brands are going to be most resonant with the Snapchat Generation. Earlier last year, our team effectively reprioritized to address verticals that were set up for resilience in growth once the effects of COVID became clear. Our teams found ideal customer fit for food delivery, gaming, streaming, e-commerce, CPG, among others, and we put fewer resources into verticals like travel and automotive as the impacts were more severe in those categories, but we will have the ability to pivot back as soon as those categories are ready to advertise once again at the same levels where they were before. Many might assume that direct response marketing like mobile app install is the full realm of digital-first brands, like mobile games and online start-ups as opposed to big brands. But this year, we also partnered with larger legacy brands to pivot to DR across retail, consumer packaged goods, entertainment, restaurants and more. Due to COVID, millions of consumers are establishing sticky new digital habits that might have otherwise taken years to farm. We saw more growth in e-commerce in the last 9 months than in the 9 years proceeding it as an industry. Those habits are here to stay. Without the usage up and stores closed, many large brand advertisers have pivoted, reimagining their app as a primary channel for customer engagement and sales rather than playing second title to a physical store or a website. For instance, restaurant chains that used to create awareness ads about tempting food choices, the drippy burger ones, and they will become app install marketers too. They're all direct response advertisers now. Same is true for CPG players, where we've seen rapid shifts towards performance marketing tactics that fueled the new surge in e-commerce sales. And in a similar fashion, our streaming vertical accelerated dramatically as theatrical release is halted. There will be a new normal and people students start venturing back out into the world. You really want to be one of them. But the digital acceleration will remain as both consumers and brands see the benefit and ease of mobile e-commerce. Longer term, we believe Snapchatters will engage naturally with businesses of all sizes across our service, whether through a branch profile, finding store hours on the map or interacting with products using an AR lens. You might discover or learn about a product or a brand via a commercial or a story ad, but that's going to drive you to a brand profile while you find an augmented reality experience that allows you to learn more about the brand and cable or try on the product and augmented reality. In addition, with our measurement tools, we can help advertisers track all the way to conversion, purchase or sign up. This combination ultimately provides a richer advertising experience that you can't copy on our traditional medium like television. This is why we believe we have a huge opportunity continues to take share of the digital ad market as we scale. Hopefully, you have a better understanding of how we are positioned for long-term success. I have been here just over 2 years, and it has been the most rewarding, exciting, fast-moving, innovative and invigorating time of my career. The best part about Snap is that we do all of this with kindness and appreciation for our team, and we're just getting started. We're going to take a 15-minute break now. So feel free to resell your coffee cup, but then join us again, so you can hear from more of our senior leaders here at Snap. [Break]

Hi, everyone and welcome back. I'm David Ometer, Senior Manager of Investor Relations. Hope you enjoyed hearing from Evan, Bobby and the team earlier today and have a better sense of our company, our vision, how we think about building products, turning them into platforms and then into businesses. Coming up, you'll be hearing from 4 more senior leaders at Snap, and we will then move into our analyst Q&A session. I would like to quickly remind you that at the conclusion of today's event, we will be posting our presentation and transcripts to our Investor Relations website. Finally, and most importantly, thank you for taking the time to join us today. And now it is my pleasure to introduce you to Kenny Mitchell.

Hi, everyone. I'm Kenny Mitchell, the Chief Marketing Officer here at Snap. My team spends its time on both business-to-business and business-to-consumer marketing efforts. Like dimensionalizing the Snapchat generation through brand campaigns, highlighting new products and features and original content to Snapchatters and educating global clients on how they can have success driving their business through our powerful ad platform. I have a unique position on our team as someone who is a long-time advertising client of Snapchat. I had the privilege of leading marketing team at Gatorade and McDonald's that leverage Snaps video and AR ad formats. You might remember the Gatorade Dumplings dumping virtual Gatorade on the millions of Snapchatter's heads. That was a really fun and innovative lens that was ahead of its time back in 2016. So I understood Snap's unique ability to drive business value long before I joined 2 years ago. That was the early days of advertising on Snap. And honestly, there were some growing pains in those things. So much has evolved since then, and I feel grateful to have the opportunity to share our marketing strategy with you. Historically, Snap's successful, meteoric growth was largely driven organically by the community network effect. That contributed to high levels of engagement and retention and remains a core pillar of how we grow today. With the size and scale of our community and business, we now supplement that with a formal marketing practice. But we keep it lean. That's our philosophy. We utilize a small but mighty team and disciplined investment approach to drive growth. We speak to 2 primary audiences in our work, our community and our advertising partners, and I will walk you through how we engage them. Let's start with our community. So who are they? Let's take a quick look. [Presentation]

As you can see and have heard today, we call this community the Snapchat generation. And they use Snapchat to communicate with close friends and keep up with what's going on in the world around them. Let's talk about the sheer scale of the Snapchat generation. An average of 265 million people from around the world use Snapchat every day, many of whom skew towards Gen Z and millennial. In the U.S., U.K., France, Australia and the Netherlands, we reached 90% of 13 to 24-year olds and 75% of 13 to 34-year-old. And while people typically associate Snapchat with only having a young teen community, it might surprise you that approximately 80% of our reach is above 18. We focus a ton on the Snapchat generation because simply put, they're critically important to the future. They're driving new behaviors. They have unique values and frankly, they're defining what the future will look like. As consumers, Gen Z and millennials are powerful. We will be $1 trillion in purchasing power and making up 40% of global consumers. As for their values, Snapchatters take social responsibility very seriously. They celebrate their individuality, they build communities, they nurture friendships, and they communicate in many different ways, often through AR and video. They're the most educated, most tolerant, most active and most diverse generation we've ever seen, and they like to communicate constantly and often with the camera. Snapchatters on average opened the App 30 times a day. That's why Snapchatters are 150% more likely to prefer to communicate with pictures over words than non Snapchatters. On Snapchat, they express themselves freely with their closest friends. It's the easiest and fastest way to communicate the full range of human emotions without pressure to feel popular, pretty or perfect. That's why 95% of Snapchatters say that the app makes them feel happy, more than any other service tested. As a result of the pandemic, the Snapchat generation has a renewed appreciation for friends and family. And they will carry this deep need for connection through as a defining characteristic. Snapchat was built for what matters to this community. We know that beyond communication, they also care about great content. But they view it differently. Their cord cutters. Some are even cord nevers, too young to even have cords in the first place. According to eMarketer, the average U.S. adult spends 29 more minutes per day with mobile content compared to TV. And that number is going to keep going up. We believe this trend is driven primarily by the younger generation, whose time spent watching TV is a fraction of their older counterparts. You won't find them on linear TV or commercial support to streaming. The engagement we see on Discover validates this shift. Whether it's the shows and content they watch on our platform or the pictures and videos they send to their closest friends, the Snapchat generation has completely transformed the way the world communicates and experiences entertainment. Mobile, full-screen and visually arresting. So that's a bit about who the Snapchat generation is and why we care about them so much. Now I want to share a bit more about how we reach the Snapchat generation and grow our community. We generate awareness and understanding of Snapchat's values through strategic marketing initiatives that support our long-term goals. Here's an example. In the summer of 2019, we launched our first ever global brand campaign called real friends. The campaign highlighted how dozens of pairs of friends and family members around the world use Snapchat to stay connected. That campaign amplified one of our biggest, unchanging priorities, being a place that supports real friendship. We want Snapchatters that feel free to be themselves, free from judgment. That's a concept we believe in as human beings, but it's also an important strategic competitive advantage. We also celebrate tent-pole moments to drive engagement with current and potential Snapchatters around the world. To celebrate Diwali with real friends, we created custom experiences, including lenses, filters, stickers and bitmojis. We saw a 25% lift in daily active users during Diwali and over 75% increase in story posters. Halloween has been another great example of a tent-pole moment. In 2020, we launched more than 100 Halloween lenses, which led to more than 9 billion impressions. We're a global company, and we need to reflect the values, culture and personality of our communities in every region we're in. It's no surprise that when we're able to localize content and experiences for specific cultures, we see dramatic improvements in engagement. And it makes sense. Snapchat should always feel like it's made for you, no matter who you are. Another priority for growing our community is literally growing up with it. So we're investing and retaining our users as they age up. Our content, which Ben will talk a little bit more about is a key component of that. And we also see high engagement between parents and kids. The beauty here is that when your parents are on Snapchat, it's not embarrassing. Unlike other platforms, we don't have public comments or friends list. Ultimately, we believe that celebrating our community of real friends and the moments that are important to them and highlighting our innovative products and powerful camera will increase engagement with our current and future Snapchatters. Now I imagine that hearing how we plan to increase our advertising base is of particular interest today. Marketing works directly with our sales and monetization teams to support revenue growth by submitting our value proposition to advertisers. We leverage marketplace data on the advertising community that's going through our direct engagement with brands, and a biannual research study where we uncover valuable insights to inform our marketing approach. One important insight we see, awareness of our platform is not an issue. And for those who consider us, they are likely to spend with us and have strong perceptions of the platform to drive their business. However, we do have an opportunity to convert more advertisers who are aware of Snapchat, to having a deeper understanding. And when we're successful, we know they'll be far more likely to advertise with us. In fact, in the U.S. and France, roughly 90% of advertisers who consider Snapchat go on to spend on the platform. In one study, we identified a material opportunity to address. Not all advertisers understood the value of our audience. So to help advertisers better understand the value of the Snapchat generation, in August, we launched our first ever global business-to-business marketing campaign, showcasing the values and behaviors that categorize our community. The campaign ran in 10 markets and featured unique insights on our community and brand testimonials. In fact, the video you saw a bit ago was actually a part of that campaign. This was received positively by our advertising partners and increased our brand image across several metrics. We saw strong ad recall and significant increases in advertiser consideration of Snapchat as a partner. In measured markets, we also saw over 50% of advertisers were more likely to consider Snapchat due to the campaign as measured by advertiser perceptions. Another opportunity noted by global advertisers with a gap in understanding of our ad solutions. To address this issue, we launched Snap Focus, an online learning and certification course for new and last advertisers looking to better understand Snapchat and how to find success on our platform. We followed up the launch later in the year with Snap Connect, a new set of content and certifications aimed at educating global marketers about direct response advertising at Snap. I'm excited to share that within 7 months, more advertisers have completed Snap Focus certifications than the entire 3-year life of our previous education services. In summary, we built Snapchat for generation that craves visual communication and values close friendships. In turn, it's become a daily fixture in hundreds of millions of lives. We also built it to meet the ambitious goals of advertisers around the globe. I'm thrilled with our team, our disciplined approach and our insights driven strategy to drive future scale. I will be busy leading initiatives that will help grow the Snapchat generation that drive engagement with our new products and features and deepens our relationships with advertisers. I could not be more energized about what's in store. Now I'd like to welcome Ben Schwerin, who will talk about how we are revolutionizing mobile-first content and growing partnerships across Snap.

Thanks, Kenny. My name is Ben Schwerin, and I'm the SVP of Content and Partnerships at Snap. Our team believe deeply in the power of relationships. When we started, we asked our partners to make a bet, that we would build and innovate together, that we were committed to understanding their goals and would help them achieve them. And that we could ultimately invent entirely new businesses and create long-term value for their customers. We know that we can't succeed unless our partners and community do it too. A vibrant diverse partner ecosystem today puts us in a strong position to launch new platforms tomorrow. I'm excited to share how we're working with our partners to power our content and develop our platforms. In early 2015, we introduced Discover, a closed platform with top media partners like CNN and ESPN. It featured premium quality vertical made-for-mobile content. It was an entirely new way to entertain and educate a young audience that was increasingly hard to reach anywhere else. We created a sustainable, fair business model from the start and relentlessly focused on what mattered most to our partners. Today, we have a vibrant ecosystem, featuring diverse localized content in 9 different languages from nearly 500 partners in 17 countries around the world. While we've grown our focus on quality, integrity and brand safety has remained the same. Our partners are handpicked, and content is carefully reviewed according to our community guidelines. We're proving that real news can still win. In Q4 2020, 25 different channels on Discover had a monthly audience of more than 20 million viewers. NBC alone reached over 50 million viewers across its 12 channels. With Discover, we set out to reinvent the news staff. And when we launch shows, we collaborated with our partners to reimagine what it meant to watch short-form video on a phone. Together, we're producing compelling dynamic content experiences and providing brands with premium curated marketing opportunities. The total daily time spent watching shows increased by nearly 70% year-over-year in 2020. And in the second half of the year, over 85% of the U.S. Gen Z population watched at least one Snap Original, shows made exclusively for Snapchat. We're working on originals with A list stars like Ryan Reynolds, who launched the Show last month called Ryan Doesn't Know and Will Smith, whose talk show, Will From Home, just finished its second season bringing a total number of viewers who watch the series to 43 million. We listen closely to our community and are deeply committed to telling stories that cover the issues most important to them. While Black with MK Asante, which premiered in late 2019 and recently aired its second season, explores what it means to be young and black in America. And to date, reached nearly 17 million viewers. The video you're about to see gives you a sense of the innovation and diversity of Snap Originals. Let's take a look. [Presentation]

Now let's talk about our creator community. When we released stories way back in 2013, we saw popular Snapchatters begin to connect with their fans in a more personal way than ever before. Our team invested heavily in establishing close relationships with talent. We're based in Los Angeles, and it's in our DNA. Their direct feedback and insights have helped guide the development of products and enabled them to amass global audiences, communicate with their most passionate fans, connect with brands and build businesses. The strong bonds we've built are helping to shape our newest content platform Spotlight. We've heard from many aspiring creators that finding financial success on other services can feel like an unreachable goal. We believe that our community should be compensated for their creativity. That's why we're distributing over $1 million a day to creators who make the most engaging Spotlight Snaps, and you don't have to be a famous celebrity to earn. Success is driven by individual submissions rather than followers. Spotlight is a fun, safe and fair environment that provides an incredible new opportunity to be discovered on Snapchat. For iOS and Android developers, finding an audience is more challenging than ever before. We listen to the community and are building different kinds of platforms designed to help them succeed. We launched games in 2019 and Minis in 2020. Our approach for both is similar to how we created Discover. We began with a small number of handpicked partners who work closely with us to innovate and build sustainable ecosystems. Game developers get instant access to a large engaged audience and the ability to leverage powerful exclusive Snapchat tools and capabilities like our Bitmoji avatars with no download required. They earn revenue from our popular format Snap Ads, just like media partners on Discover. With Minis, our partners can build lightweight apps inside Snapchat, leveraging our existing platforms in ways that make it easier and faster to deliver their core product value. For example, Atom Tickets built the Mini to help Snapchatters choose a movie, find a theater, select seats and buy tickets. We believe that as they grow, games and Minis will deliver new opportunities for both engagement and monetization. Now that I've told you about how we're helping developers build businesses on Snapchat, let's talk about how we are bringing the best of Snapchat to our partners' apps. Snap Kit makes it easy for developers to integrate our most powerful features like Bitmoji or augmented reality lenses. We built Snap Kit from the ground up with a privacy-centric approach. This means the focus is on creativity and user experience, not user data. We're helping start-ups grow and also partnering with some of the biggest companies in the world. Spotify and Reddit are using creative kit to seamlessly share dynamic content from their apps directly into Snapchat. In addition, we partnered with Twitter, on an API integration that allows Snapchatters to share public tweets in a Snap. Bitmoji has become so much more than an avatar. They make it more fun to talk to your friends, express how you feel and showoff the latest trends from brands like Ralph Lauren and Jordan. Bitmoji help you find your friends on the map and they even become the stars of your favorite games. We built Bitmoji Kit because we knew our partners could find innovative ways to make their avatar even more powerful. Samsung, Google, Tinder, Venmo and OnePlus are just a few that have integrated Bitmoji. We built one of the world's most popular cameras powered by an advanced augmented reality ecosystem. 200 million people a day on average engage with AR lenses and over 1.5 million of these lenses have been created by our community on Lens Studio. Augmented reality is changing the way we communicate, play, shop and learn. We're investing in a future where computing is overlaid on the world. But we can't do it alone, that's why we built Camera Kit. Camera Kit extends the reach of our AR technology and lends creator community to our partners' applications. We're already powering experiences for Major League Baseball, Triller and [ Nuvo ]. We're also helping companies outside the U.S. offer their customers locally relevant AR experiences, like in India, through our new partnership with Sharechat and their short-form video platform Moj and we're just getting started. We're building long-term relationships with partners as we scale our business and product offerings. Today, more than 1,000 apps have integrated with Snapchat and nearly 150 million Snapchatters are engaging with these integrations every month. Our partners are utilizing our innovative platform products and building sustainable businesses on Snapchat. We're expanding these relationships and creating new ones and are so excited about what's ahead. Now I'd like to welcome Jerry Hunter to show you around our engineering organization and how all of the incredible products we dream of actually get built.

I'm Jerry Hunter, SVP of Engineering at Snap. It's a pleasure to speak to you all today, and I'm excited to talk to you about the work we've done to build the technology foundation that underlies the Snapchat application and the platforms our Snapchat community and partnerships each day. Snap was an early mover to build on top of third-party cloud infrastructure and has been critical to our early success. We've also done a tremendous amount of work over the past couple of years to rebuild our proprietary technology stack in order to make it easier and more efficient for our engineers to innovate on top of the cloud infrastructure. This has allowed us to accelerate our pace of development to a level that we believe has been impactful to Snapchatters, our advertising community and the many partners who are building their businesses on Snapchat. Now let's dive a little deeper and discuss our technology stack and how it's helping to empower all of this innovation. There are 4 primary components to our technology stack, which are pictured here on the slide: First, we have third-party cloud infrastructure partners that we leverage. Today, those are Amazon Web Services or AWS, and Google Cloud Platform or GCP. Second, the Snap back end base layer, which we recently rebuilt in-house. This layer contains nearly all of our connections to the cloud, common services used across our products and serves as a base layer upon which we innovate on behalf of our community and partners. Third, by the customer-facing products and platforms that Snapchatters and our advertising creator partners, and content partners use each day. These are separate boxes here because they're built on separated code basis with clean well-defined boundaries, meaning that we've modularized our code base on the mobile phone. Fourth, for our self-service platforms that our partners leverage to build their products and businesses on Snapchat, including the monetization platform, access via Ads Manager, Snap Kit, Minis and the Snap Games platform. Let's start from the bottom of the cloud. We built Snapchat on cloud-based infrastructure from day 1 as opposed to building our own data centers. We are fortunate that this is an option when we began to build the company 9 years ago. We've evolved over time from a single cloud partner to a multi-cloud approach. There are several reasons why this strategy is so important to our success. By leveraging third-party cloud providers for basic infrastructure needs such as storage, compute and media delivery, we're able to access fully scaled and expandable capacity from day 1 for any product or service that we launched with no upfront capital commitment. This was very important in our early days and remains an equally important advantage for us today as it lowers the cost of rapid innovation and product development. The implications for our capital expenditures may be obvious but the benefits extend far beyond this. We do not have to dedicate scarce engineering time and resources for building and managing infrastructure and services that are necessary to make our products work but that are not critical to differentiating our core product value. When we launch new products, such as Spotlight, we can, therefore, move faster through development phase and launch for our community with confidence that we will have the capacity to handle the rapid adoption with attractive unit economics from the outset. This advantage is amplified by our multi-cloud strategy, which enables us to select optimal service from the optimal cloud provider for each of our workloads at any given time or phase of our development. As each cloud partner is constantly innovating to deliver differentiated services and expanding their scale of their operations, we benefit from improving pricing and quality of service over time. We are continuously implementing migration projects to redirect workloads in order to optimize for the service and cost across clouds. In 2020 alone, we completed 4 major cross cloud migration projects. And in each case, have benefited from material cost and quality improvements. The ability to optimize across partners and to access their immediate scale is increasingly important as we accelerate our growth in new markets. By leveraging third-party cloud providers, we can enter into a new country or region and immediately have the benefit of local connectivity and infrastructure at scale. This allows us to leverage infrastructure in regions all over the world on an as-needed basis. In the early days, we utilized a single cloud in a single region in the middle of the U.S. If you're in India and you are communicating with somebody a mile away from you, those communications had to travel all the way back to the U.S. and then make their way back to that person in India. That delay made the act clunky and slow. Today, utilizing regionalized infrastructure allows us to get our service as close to the customer as possible and to improve performance for our Snapchatter community. One last, but important, point regarding our use of third-party cloud infrastructure partners is that we have a high degree of optionality and flexibility over time. We consider or adjust our strategy over time by adding new cloud infrastructure partners potentially bringing service -- individual services or workflows in-house. We regularly deep dive on the economics and efficiencies, including which clouds we use for which services and the high-level build versus ramp economics. Due to the flexible nature of our model, we could easily choose to build and operate some of the services in-house. If we could do so more efficiently than the third-party could which so far has resulted in us not building internally given their scale and cost benefits that come with it. While this could make sense for some services at some point, thus far, practical implications of our analysis have been working with cloud infrastructure partners on favorable rate negotiations that were informed by the work we did. For example, we completed great improvements in new service negotiations for each of our providers in every quarter of 2020, and we expect that these relationships will continue to evolve as we work together over time. A lot of the flexibility that I've mentioned today, including the ability to migrate workflows or specialized services between cloud infrastructure partners is empowered by our work to rebuild the base layer of Snap technology stack, where we manage and maintain the vast majority of our connections to the cloud. This is the middle layer of our technology stack that you saw earlier and is what decouples our Snapchatter and partner facing platforms from our cloud infrastructure providers. This layer is central to how we manage our overall product development. Practically speaking, we broke up the monolithic back-end code base, which was a bottleneck of both engineering velocity and availability and transformed it into a web service back end where a small, nimble engineering teams can make changes independently to more quickly deliver innovation to our end users and partners. This strategy allows us to have dedicated teams focused on managing efficiency of our cloud infrastructure who can consistently tune and optimize what services we use, what provider we use and how we use those partners. We also centralized internal services here that span all products within Snap, such as identity and friend graph. This makes it much easy and faster for the teams that builds our customer-facing products to innovate. It also benefits our unit cost by streamlining connections to increase performance. To put a finer point on this, we now have a dedicated team focused on operational excellence that sits over the back-end base layer with clear visibility and instrumentation over the workflows that runs end-to-end from our customer-facing platforms, such as camera, all the way back to our third-party cloud providers. This has allowed us to focus on performances and feature across our technology stack in order to make our application and features work faster, more reliably and more efficiently. One of the most exciting aspects is that we constantly find that when we take action to make something more reliable, it not only drives engagement with our community, but it also allows us to get unit cost efficiencies. Likewise, we almost always find that those efficiencies, make our workflows faster and more reliable to our community. In this way, the back-end base layer is enabling improved outperformance, which drives engagement and improved unit costs, which also allows us to reinvest in our product, which is a virtuous cycle for our business. For example, through the recent rewrite of our communications platform, we reduced the median latency of sending Snaps by over 20%. With support efforts in being one of the fastest ways to communicate, that efficiency not only benefit Snapchatters, but it also reduced our message unit cost by at least 25%. This is part of our ongoing program of making our products better for Snapchatters, while also driving down infrastructure unit cost for our business, which results in more resources to invest back into our products. From here, let's talk about the technology platforms we've built on top of this back-end base layer, starting with the services that our Snapchatter community uses every day. Our team has spent extensive time and effort separating out and modularizing the code within our application in order to allow the development teams that manage each of these code basis to innovate faster and independently. The back-end base layer empowered this independence by allowing each team to easily access core back end technologies and services while minimizing the need to coordinate across teams or manage the connections of the cloud as they work on individual platforms. For example, this allows our match platform team to operate independently from our communications platform while easily accessing common tools, such as user identity or the friend graph, which improves our ability to experiment quickly and deliver new features and functionality quickly, which also increases the pace of innovation of Snap. Ultimately, we believe our agility and product development is one of the most important differentiators. You may have noticed, we're learned from Evan and Jacob's presentations earlier today that the pace of innovation and new product releases has accelerated over the last couple of years. This is not a coincidence. The infrastructure we have built has empowered the only pace of developments, products and features as our teams have been able to take advantage of our back-end base layer and modularization. Spotlight is a great example of an entire leading platform that was built and launched under this new approach. We were able to bring Spotlight to our community sooner with richer functionality, precisely because the ability to build on our back-end base layer and to operate as separated modularized code base. Our forward-thinking technology stack and modular approach to empower platform development has also expanded our ability to innovate on behalf of our partners. And I'd like to turn to that next. One of the most exciting aspects of our development roadmap is the work we are going to build scalable self-service platforms that allow our partners to build businesses and develop products using our tools, to reach and engage our large and growing Snapchatter community. We've leveraged our back-end base player and modular approach, building platforms to build several partner platforms that are empowering groups and helping our partners find success on Snap. The first and perhaps most mature among these is our self-service monetization platform that powers our option and our advertising partners access through Snap Ads Manager. This full-featured platform has reached near feature parity with the best and most mature ads platforms in the world. And now powers nearly all of our fastest-growing advertising business. We've since followed with our games platform, our Minis platform and the Snapchat platform. Each of which gives third-party developers access to elements of our back-end base layer in a privacy safe manner, so they could develop engaging experiences for our community that are powered by our technology and tools and assets such as Bitmoji, Chat and the Camera. In the last 3 years, our focus has been to build the modern architecture that has enabled us to significantly improve with the average Snapchatter experiences. By focusing on modularization on the client, both for iOS and Android, we've not only created engagement enhancing performance boosts, but significantly improved the pace of feature innovation. By modernizing the back end to internal web service architecture, we have and will continue to create engagement, enhancing performance improvements in existing markets, but also bringing enormous improvements to our most important international markets by localizing key parts of the Snap based layer. All this while simultaneously using negotiating leverage that comes by having multi-cloud and constant unit cost and engineering improvements that drives unit cost lower across the entire stack. So faster, higher quality and lower costs. All this is designed to enable us to cost effectively scale rapidly. But it's also designed to enable our self-service partners to scale quickly too. Highly performing, low-cost platforms not only help us grow quickly, but it helps our partners from advertising to games, easily connect on to our platform and find scalable success, providing more vectors for virtuous growth. Now I'd like to turn it over to Derek, who will talk more about our financial progress.

Hi there. I'm Derek Andersen. Thank you all for joining us today. I'm excited to share how we think about managing the investments in our business and how we expect our financial future could unfold in the years ahead. Please be reminded that as we mentioned earlier, we will be making forward-looking statements. So please be sure to review that disclaimer. I will start by addressing the progress we've made in recent years. As you can see, DAU and revenue growth accelerated over the last 2 years. The acceleration in our community reflects the redesign to separate social content from media content, the rebuild of our Android app, our augmented reality innovations and the investments made to localize our product. The acceleration of our revenue growth reflects the sophistication of our ad platform, the measurable returns delivered by our ad products, and the investments we have made in our sales teams to support our advertising partners. Over this same period, we have scaled our operations efficiently in order to achieve full year adjusted EBITDA profitability for the first time in 2020. This was a goal we set at the beginning of the year, and we are very proud of our teams for executing against our plan to deliver this result amid a challenging operating environment. Let's focus next on how we build on these trends, starting with the opportunity to grow our community. We view the smartphone population as a good proxy for our addressable market. North America is our most established region, and we have made the most progress with the 13 to 34-year-old demographic in the U.S. and Canada, but we have lots of room to grow beyond this base. Rest of world is our least mature region, and we have been able to accelerate our growth here post the rebuild of our Android app, and we are just getting started. In the middle, you have Europe, where we have made solid progress with our core demographic in a handful of countries, but a significant room to grow beyond this base. Now let's dig a little deeper into this opportunity. The rest of world region comprises the majority of the global smartphone population and is the largest driver of our community growth. Our DAU represents just 4% of the total rest of world opportunity. Focusing on our core demographic of 13 to 24 year olds, this group alone represents more than 0.5 billion smartphones. For comparison, we reach over 90% of this group in our established countries. So this presents a large opportunity for us to grow. Now let's talk about how we can capture this opportunity. Following a rebuild of our Android app, we have made investments to localize our product for specific markets, including adding local language support, building local AR creator communities, adding locally relevant content, investing in local marketing initiatives and forming local telco partnerships to improve distribution and bandwidth. This set of tactics forms the basis of a repeatable playbook we can now leverage to drive growth. One of the first markets where we employed this strategy is India. We focused on India early because it has a large and fast-growing population of young smartphone users, because high-speed mobile networks are expanding quickly and because GDP per capita is growing rapidly. We've made significant progress in implementing our playbook in India. And we are encouraged to see that our DAU in India has more than doubled year-over-year in each of the last 4 quarters. We view this progress as validation of our approach and are excited to extend our playbook to more countries. Now let's discuss where we'll focus our growth investments in the near and medium term. In our most established markets, our penetration of the 13 to 24-year old demographic is typically above 90%. In these markets, we will first be focused on continuing to win with new smartphone owners as they enter their teen years. Second, we will seek to maintain our strong long-term retention rates to ensure we age up organically. And third, we will be making focused investments in our product, content and marketing to deepen engagement and accelerate adoption amongst older demographics. Our international growth opportunity markets are typically ones where we are only lightly penetrated, even amongst our core 13 to 24-year old demographic. And these countries are typically android-heavy. In these countries, we will focus on executing our international growth playbook, as we've discussed earlier. We believe that the large untapped population of smartphone users worldwide and our well-developed approach to growing our community will enable us to sustain our recent elevated growth rates for years to come. Now let's turn our focus to our plans to grow our top line. We have made significant progress in growing our ARPU. North America and Europe have led this growth, as we have begun to ramp monetization in our highest penetration market. ARPU growth in rest of world is best viewed as an output metric at this stage as we accelerate the growth of our community, while just beginning to monetize in a subset of the most mature markets. To put our monetization potential into context, we compare our ARPU and audience size to more mature platforms. Here, we focus on North America, as even the most mature platforms are generating approximately half of their global revenue in this region. We still have a long way to go to realize our full monetization potential, given our unduplicated reach with critical demographics. The depth of our engagement across our platforms and the sophistication of our advertising platform and products. We believe that North America alone holds enough opportunity to keep our topline growing at attractive rates for years to come. To put a finer point on this, let's look closer at our current penetration in the world's largest digital ad markets and where we observe high long-term retention rates. We've achieved over 70% penetration of 13 to 34 year olds, and countries comprising over half of the world's digital ad spent. While we are very excited about the opportunity to grow our community globally in order to expand our long-term potential, we already have deep penetration in the markets that will be most critical to driving our top line growth over the near and medium term. Now let's talk about how we plan to capture this opportunity. We'll start with Stories and Discover. This is our most mature screen for monetization, yet still very early in terms of realizing its full potential. This platform began with friend stories. And they are a powerful draw, bringing Snapchatters to this screen, which is expanded to include content from publishers and shows that leverage our unique mobile-first storytelling formats to engage our community. In 2020, total time spent watching shows was up nearly 70% year-over-year. As we continue to deepen our engagement, our available inventory of premium ad units has grown. These premium ad units are among our highest yielding and in high demand, with revenue from our commercial's ad product, more than doubling year-over-year in each quarter of 2020. As a result, we believe this platform has the potential to deliver robust top line growth for years to come. Next, we have the Camera. Our app opens to the camera. Our audience opens the app 30 times a day to create more than 5 billion Snaps on average. And the vast majority of Snapchatters leverage our AR tools every day. The resulting advertising inventory potential of our camera is, therefore, already immense. Today, it is simple and fast to create an AR ad product through our self-serve tools or by leveraging our creator community. The cost to start an AR campaign is now just $5 and can be tied directly to measurable actions such as a product purchase. With the establishment of a brand profile, our advertising partners now have a home, where they can drive audiences, which turns their AR experiences into lasting assets. It is still very early in the evolution of AR advertising and we are excited to be a clear leader. We believe the camera will be a multibillion-dollar platform and that augmented reality represents our most exciting long-term opportunity. Spotlight provides a compelling experience for engaging with Snaps created by our community. We are currently focused on improving the product experience for our creators and Snapchatter community. But the platform is already attracting a large and deeply engaged audience with more than 100 million monthly active users in January. As a result, we are excited about the potential for Spotlight to further expand the supply of our highest yielding and most in-demand advertising products in the future. We elevated the map with the introduction of the navigation bar last year. And today, the map reaches more than 250 million monthly active users. In 2021, we will focus on building utility for local businesses to begin to lay the groundwork for future monetization. We believe the Map will be a multibillion-dollar platform over the long-term and that it represents a logical on-ramp to Snap's advertising platform for millions of small businesses around the world. Next is our Communications platform. Currently, the monetization of the screen is focused on the sharing of sponsored AR experiences amongst friends. As I mentioned earlier, these advertising products are well positioned to grow going forward. Games are a natural extension of our communications platform that allow friends to play and have fun together. Our games platform includes our commercials ad unit, and we are now experimenting with tokens to enhance gameplay as well. Minis are another natural extension of the communications platform. It is early days for Minis, but there is a natural path to include more partners over time, which will lead to more potential transactions. And of course, our ad products will be available to help our partners expand the reach of their Minis on our platform. We believe that our innovative and community-focused approach to monetizing our communication platform, we'll build it into another $1 billion platform over the long term. We believe that based on the monetization platform we built and the product road map we have discussed today that we can responsibly grow our top line revenue at 50% or better year-over-year for at least the next several years. I would be remiss if I didn't point out that there are risks to the assessment. To achieve this, we will require a favorable operating environment and strong execution amongst many other factors. That said, we've demonstrated an ability to execute our plans. And we are confident in the plans we've laid out here today. Now let's turn our focus towards our cost structure. Scaling our business efficiently, to expand gross margins has been critical to our financial progress. Over the past 2 years, our infrastructure costs per DAU have declined by 2% per year, while our ARPU has grown at an average rate of 27% per year. This leverage has allowed us to make strategic investments in content, while expanding our adjusted gross margins by 19 percentage points over the last 2 years. In the near term, we expect content costs to be a headwind to margin expansion as we continue to support the launch of Spotlight with fixed content investments. That said, we still expect gross margins to expand over the next year, but at a much lower pace than in 2020. We see a path to reach 60% or better on gross margins over the medium term, as we begin to monetize Spotlight and the Map and as we continue to scale monetization of our other platforms in the years ahead. In order to deliver on the product roadmap and the topline growth that we have discussed today, we will be investing heavily in the future of our business. Over the last 2 years, we have carefully prioritized our investments in order to grow our level of investment at a sustainable rate, while making consistent financial progress. This balanced approach was a key input to achieving full year adjusted EBITDA profitability in 2020, and we will carry this approach forward. Our revenue growth accelerated in the second half of 2020. And as I mentioned earlier, we believe we can sustain approximately 50% topline growth rates for the next several years under favorable operating conditions. With this expectation, our balanced approach will lead to higher levels of investment. We estimate that the year-over-year growth in operating expenses will rise from approximately 25% year-over-year growth in 2020 to year-over-year percentage growth in the mid-30s in 2021. The exact rate of growth in operating expenses could vary around this range depending on the rate at which we ramp hiring efforts as well as the ultimate timing and scale of specific investments in our product and marketing. This level of investment will allow us to invest in our monetization and sales capabilities to capture our ARPU opportunity faster; to invest in our product; to build on our pace of innovation; and to invest in marketing in order to grow our community for the long term. While our investment levels will be higher in the coming year, we remain committed to sustained full year adjusted EBITDA profitability and continued financial progress over time. Now let's move further down the P&L. Currently, stock-based compensation represents more than 80% of the bridge from adjusted EBITDA to net income. SBC is an important strategic input for our business as it is amongst the most powerful mechanisms, we have to build the ownership mentality into our culture. Today, more than 95% of our employees receive a portion of their compensation in the form of stock that vests over multiple years. We believe that carefully managing our overall rate of dilution is a critical input to building shareholder value over the long term. The rate of growth in our fully diluted share count went from 4.6% in 2019 to 3.4% in 2020. Excluding the impact of any material M&A or financing activity, including a potential dilutive impact of prior convertible notes, we believe we have a path to get this rate to 3% or below in 2021 and remain committed to managing this carefully going forward. While we plan for the expected, we believe it is important to prepare for the unexpected as well. As a result, we believe in maintaining a conservative balance sheet by raising capital before we need it and when market conditions are advantageous. Over the past 2 years, we've raised 2 rounds of convertible notes, with total proceeds of approximately $2.3 billion. These 2 transactions, combined with a rapidly improving free cash flow, have allowed us to build a base of cash and marketable securities of $2.5 billion, which equates to approximately 1 year of our total cash cost structure. In addition, we maintain a credit facility of over $1 billion to ensure access to additional liquidity. While much of our investments have focused internally on hiring and product, we have also established a track record of investing in teams and technology to accelerate our product road map. Here, you see a small sample of the investments we have made in recent years to accelerate our road map across our various platforms. In each case, these investments provided key technology and personnel to advance our business. While all were strategically important, none have been large enough to alter our culture or risk the momentum of our business. It is difficult to predict what opportunities may present themselves in the future. But we intend to maintain a strong balance sheet to ensure we can act strategically when opportunities arise. I hope that you will take away with you today an understanding of our strategy to grow our community over time, the strength of our monetization platform, the long-term ARPU potential of our business and appreciation for the discipline we are employing as we invest in our business. You will notice that we have also declined to provide formal annual or long-term guidance today. We believe the space we are operating in is evolving rapidly, and that it is strategically important to remain agile at this stage in our growth. Given this, we have endeavored to share how we plan to go about growing our business, how we think about balancing our investments relative to that growth and why we believe in a conservative approach to building our balance sheet. We hope that you will find the transparency around how we think about the business to be constructive and that it will be informative as you consider how our financial future may unfold over time and as the operating environment inevitably changes. In just a moment, our Chief Communications Officer, Julie Henderson, will join to get us started with our Q&A session. Thank you, again, for coming today, and we look forward to taking your questions.

Hi, everyone. Thanks so much for joining us today. I'm Julie Henderson, and I lead Communications at Snap. Welcome to the Q&A portion of the day. I'm joined here with Evan, Derek and Jeremi. In a second, we're going to open it up to our analyst questions. While everyone is getting lined up in the queue, I thought I'd get us going with one question for Evan. Evan, we heard a lot of information today from various leaders across Snap. I guess I would ask you, over the next 3 to 5 years, what are you most excited about? And where are you spending your time?

Thanks, Julie, and thanks, everyone, so much for joining us today. We're so excited to be able to share more about our business with all of you. I think the thing that we're most excited about is the potential of our camera to change people's lives. Bobby had this really prescient vision when we were working back in my dad's house, and he said, gosh, if people use their camera instead of once a week or once a month to document a special occasion like a birthday and instead they use their camera 10 times a day or more, then we can build a really transformational business. What we didn't expect was that the camera would go from being used every day as a communication tool to now a way to tell stories or see what's happening around the world on our Map or create a totally new entertainment platform in Spotlight and, of course, to drive the growth of augmented reality. So I think the thing that excites us the most is the unbelievable potential of the camera and the feeling we have that now almost 10 years later in the growth of our business that we barely scratched the surface of what's possible with things like AR and the way that they're going to drive real utility for our community in the future. And so I guess, aligned with that, I've been spending a lot of my time on our forward-looking product road map, things that might not shift for 3, 5, even 7 years and thinking about how we're going to build more engagement in our community and also transition to this future where computing is overlaid on the world.

Wonderful. Thank you. So I think we have everyone lined up. So now I'm going to turn it over to our operator, Alyssa, to open up the queue.

Your first question today comes from Brian Nowak with Morgan Stanley.

I have 2. The first one, Jeremi and Derek, I guess, around the 50% forward growth, maybe, Jeremi, can you just talk to us about sort of the largest hurdles you sort of need to overcome across your different buckets of advertisers, enterprises, DR and SMBs to sort of be able to deliver that 50% growth? Then the second one, you have so many new use cases across the platform now with lenses, Discover and Spotlight. Can you just help us better understand the incrementality of time spent across those products? And how does the overall time spent per user look on the platform?

Sure. Thanks for the question. I'll take the first part and then have Derek answer the second part. So in terms of hurdles, I think it's really around education. So for instance, we are selling to an audience oftentimes who don't use Snapchat on a day-to-day basis. While they certainly see it in and around the world around them with as many users as we have or they have perhaps teenagers or college-age students that use it all the time, they themselves don't use it all the time, which kind of relates to -- ends up being somewhat of a heavy lift in terms of education as a platform. What's been so great has been working with all of our advertising partners and developing programs like something called Snap Focus, where we're able to really distill what it is, what Snapchat is and why it matters to this generation in terms of investment. So an example of talking like that to an advertiser who may not use Snapchat every day is basically to say, open your phone, what apps do you see that you use the most? Is it your Camera? Is it the Memories in your Camera? Is it your OEM messaging? Is it your Map, et cetera? And most of the time, that is actually very true in terms of what do people use the most. And so then when we distill that to say, now for this generation, for 13 to 34, those things are all together in Snapchat, and that is their life, and that really, really helps with education. As it pertains to AR, as you heard us all talk about today, there is a massive opportunity in AR. I think some of the developments that we've been making in AR are to democratize the ability to make it either through creative partners or through something like Camera Kit, for instance, or even our ability to certify people within large advertising agencies on how to make AR for brands, is really helping with the adoption of AR, which I think previously was thought more of as something like really complex and hard to build. It no longer is complex and hard to build, but we need to educate there. So those, I would say, are opportunities for us in terms of education, both on the audience itself, what they do on Snapchat day-to-day and on AR, but I can tell you that the story is absolutely resonating and you're seeing that show up. So those would be the top 2. And I'll send it to Derek for the other.

Thanks for the questions. Derek speaking. I think the big thing I would say here, as we're thinking about the path forward on trajectory, we're at different places with different platforms, but we're very excited with momentum that we've seen in the last couple of quarters. So if you think about the acceleration of the revenue to 62% year-over-year in Q3 and then to -- sorry, to 52% in Q3 and then to 62% in Q3, we're really seeing the momentum in our platform, and we're excited about where we are with our monetization platform in terms of the products and how they're doing and they're resonating. And clearly, that ties into what Jeremi has just shared and what she shared earlier today about what we're hearing from our advertising partners. So -- but we have different platforms at different stages in terms of delivering against the hurdles over time. So if you think about our Stories platform, which includes Discover, obviously, as I shared earlier, that is still very early, but the most mature of the group. And then of course, Camera and the augmented reality platform that's built in therein, those are the platforms that are really driving our momentum today. And when we're thinking about our ability to deliver against what we talked about earlier over the near and medium term, those are the platforms we're really focused on. But it's exciting as you think about over time the ability to build upon what we're seeing from an engagement point of view, Map and then eventually, over time, also Spotlight provides an incremental avenue to deliver and expand on our ARPU opportunity. So as you're thinking about the drivers over time, hopefully, as [ we ] shared earlier, that can show a little bit bigger picture of what we see over time, both near, medium term and then longer term.

Your next question is from Michael Levine with Pivotal Research Group.

Just a question for both Jeremi and Derek. I thought the color you guys provided around international, especially as you're going with partners into some of these emerging markets is pretty -- actually pretty unique relative to your peers. Like I'm curious, is there a -- we've been in a market for X number of years or we sort of see a revenue opportunity of a certain revenue threshold where you'd look to flip the switch and really start to put more feet on the ground as opposed to working with partners as you were talking about in places like India and China?

Sure. Michael, thanks for the question. Yes. So it's a couple of different things. So in our more developing markets like India, like you just mentioned, we are really firmly convicted around this partner strategy. We believe that the biggest opportunity for us right now in a market like India is to continue to deliver on core product value, grow the audience, ensure that people love Snapchat and then come in with feet on the street. So right now we're really very much at that early phase and we're working with an awesome partner there. They've been a long-time partner with us, and we truly believe that they feel like an extension of the Snap team there, where Snap [indiscernible], they're really very much utilizing our business-to-business marketing efforts and ensuring that customers in India are very clear with our value proposition. And then we do deploy feet on the Street as we get to a certain, I wouldn't say, a time necessarily and/or a threshold, but really when that core product value starts to take hold and we feel very comfortable that the audience growth trajectory is what we want it to be, is when we'll start to bring in feet on the street, which we do have a hybrid model in India today. In our more mature markets, so Western Europe is a good example of this, and we've had feet on the street for a really long time. And what we're focused on right now is ensuring that we not only invest in growing those teams in the way that we have in North America over the last couple of years, building out the sales teams large enough so that we can do true verticalization and have that expertise that I talked about earlier today. But in addition, we know now based on what we've seen in the growth of North America that just salespeople aren't enough. We must support them with things like measurement, team members, with communications, resources, with business-to-business marketing in market. So not just translation services, which we've been utilizing a bit before, but truly real market intelligence so that we're speaking to the actual audience in those countries in the way that is localized, familiar and relevant to them and then we're going to continue to invest in our product marketing manager, for instance, to ensure that the rollout goes smoothly. So in short, in the more developing markets, it's really this hybrid strategy until we get to a place where our community is ready for a full Snap monetization. And then in our more mature markets, which where we have deep smartphone penetration where our DAU is exceptional already, we will be investing in building up those support teams to ensure that we get those same results that we saw in North America over the last 2 years in those critically important markets to us.

Your next question is from Doug Anmuth with JPMorgan.